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As providers merge and morph into behemoth health systems with market share to match, a debate is unfolding over whether competition has served consumers well and whether states should play a greater role in regulating the new entities.

Some states have in effect concluded thatrelying on competition alonehas failed their communities. Multiple players in a market wasn't enough to limit rising prices or ensure access to care, particularly in rural areas.

In some cases, states have secured limits on price increases and commitments to keep certain facilities open after the merger. To shelter mergers from antitrust action, states passed laws, sometimes referred to as COPAs, or certificates of public advantage.

Butsome legal experts warn that allowing providers to form effective monopolies — even in exchange for regulation — will only pose more harm to consumers.And some states later back away, leaving the merger in place without the oversight.

"That's a conversation we all need to have, which is best: competition or active state regulation?" Chris Garmon, a former economist with the Federal Trade Commission, told Healthcare Dive.

Tennessee and Virginia shelter merger

A new health system now dominates a large swath of rural Appalachia. The Federal Trade Commission had characterized it as a near monopoly, but the merger was greenlit by state regulatorsearlier this year after lawmakers previously passed a law immunizing the deal from antitrust intervention.

The system, now known as Ballad Health, was the result of a merger between Mountain States Health Alliance and Wellmont Health System. Ballad Health straddles northeast Tennessee and southwest Virginia, and operates 21 hospitals and employs more than 815 physicians that serve about 20 counties. The merger received final state approval earlier this year after a lengthy review process.

The FTC was adamantly opposed to the deal after conducting a yearlong investigation, calling the two systems serving as "each other’s closest, most-intense competitor." The antitrust agency warned that together the two would have a near-monopoly on inpatient services and significant market share in outpatient services. That sizable market share would likely lead to higher costs, the FTC warned.

Both Tennessee and Virginia lawmakers agreed that as long as the deal was actively supervised, or in other words, regulated by the two states, they would approve a law to shelter the deal from antitrust regulators. From there, the merging entity had to apply for a COPAand gain approval from state regulators before the deal could be finalized.

In large part, the rationale behind the approval was the fear about rural hospital closures. Ensuring rural residents have continued access to hospitals within Ballad Health's 20-county service area serves two purposes, according to Tennessee state regulators.

"The existing threat to these hospitals is substantial, which affects not only access to care, but also the economic vitality of their respective communities," the approval letter from the Tennessee Department of Health states.

Some of the terms of the deal include placing a limit on future price increases, a large financial commitment to improve access to care and improving the health markers of the overall region — not just the health system's patients.

As the deal was formed, state regulators regularly consulted with the FTC, which strengthened the states' hand in negotiating, Erin Fuse Brown, a legal expert in healthcare issues and professor at Georgia State University, told Healthcare Dive.

While some healthcare economists tend to dismiss the idea of COPAs, characterizing them as state-sanctioned monopolies, Brown said the reality is providers in rural areas are facing significant headwinds that put their continued viability in doubt.

"We don't have a perfect world where we can create all this competition," Brown said. "We're not going to get more competition back in the market."

COPAs at least provide some oversight and guarantees, Brown said.

Across the country, the healthcare market has consolidated to the point that, "no hospital market in the United States remains 'highly competitive,'" according to a 2018 report by Brown on COPAs and commissioned by the Millbank Memorial Fund.

"To me, the only thing left is the regulation," Brown said.

A cautionary tale in North Carolina

But this idea has failed to work in some places, or has served as a cautionary tale.

More than two decades ago, North Carolina agreed to shield two merging hospitals in Asheville from antitrust scrutiny in exchange for some long-term commitments geared toward protecting consumers.

At the time, Asheville's two largest hospitals agreed to a number of conditions including caps on profit margin, costs and the amount of area physicians it could directly employ.

Each year, Mission Health was required to submit reports showing whether it was in compliance with the agreed upon terms.

But North Carolina's COPA didn't work as intended, some legal experts say.

The deal was rescinded in 2015 when North Carolina lawmakers repealed its COPA statute. For Mission Health, it meant retaining monopoly power but with no oversight.

And that's the precise scenario economists fear: allowing a system to carve out a monopoly because it's nearly impossible to unwind in the future, many have likened it to unscrambling an egg.

"Antitrust law has an important, constrained, role to play but is especially inept in dealing with extant market power," Tim Greaney, a legal expert in antitrust law, wrote in Health Affairs. Greaney is a professor at the University of California Hastings College of Law in San Francisco.

What separates COPAs from consent decrees?

But for all the criticism of COPAs, some question the FTC's decision to allow blockbuster mergers with certain conditions in consent decrees, or a settlement with the merging parties.

"It really isn't different from a consent decree," Robert Berenson, a fellow at the Urban Institute, said of COPAs.

For example, the FTC decided not to block the megamerger of Beth Israel Deaconess Medical Center and Lahey Health System, citing the seven-year pricing cap deal, secured by the Massachusets attorney general in November.

The Massachusets Health Policy Commission had warned that the deal would likely raise prices as the merger would create a rival to Partners Healthcare, the state's largest provider. The two will have nearly equal market share, the commission reported.

If both consent decrees and COPAs are able to secure concessions from the merging entities, some question the difference between the two, and the FTC's stance against COPAs.

Still, the Trump administration is wary of COPAs, too, citing the influence of special interests and the difficulty of ongoing monitoring of the deal, according to a recent report on choice and competition from the Department of Health and Human Services.

"Things are going to get worse not better and I don’t see any alternative than some forms of regulation," Berenson told Healthcare Dive.